Mortgages could rise £600 due to banks' turmoil

Date:Monday 22nd September 2008

The volatility in the global banking world could push mortgages up by £600, it has been claimed.

According to a report in the Times, the merger between HBOS and Lloyds TSB and the bankruptcy of Lehman Brothers could affect buyers in the UK mortgage market.

Lloyds' takeover over HBOS could make it harder for borrowers to obtain a home loan, while Lehman's collapse and the assistance for insurance firm AIG could mean swap rates increase.

The paper reported a prediction by broker Savills Private Finance that lenders will increase their deals by 30 percentage points, which could add £600 to the cost of an interest-only loan.

Commentators have also said that a "super bank" created by the merger would reduce competition in the mortgage market, the Times explained.

But borrowers should not worry about their applications, according to a report in the Guardian.

Ray Boulger of broker John Charcol told the paper that borrowers have "no reason to panic" and that HBOS will "continue to honour mortgage promises already made".